News + updates + recent press
FHFA Extends Foreclosure and REO Evictions Moratoriums and COVID Forbearance Period.
Borrowers can now be in COVID forbearance for up to 15 months
Washington, D.C. – Today, the Federal Housing Finance Agency (FHFA) announced that Fannie Mae and Freddie Mac (the Enterprises) are extending the moratoriums on single-family foreclosures and real estate owned (REO) evictions until March 31, 2021. The foreclosure moratorium applies to Enterprise-backed, single-family mortgages only. The REO eviction moratorium applies to properties that have been acquired by an Enterprise through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on February 28, 2021.
FHFA also announced that borrowers with a mortgage backed by Fannie Mae or Freddie Mac may be eligible for an additional forbearance extension of up to three months. Eligibility for the extension is limited to borrowers who are on a COVID-19 forbearance plan as of February 28, 2021, and other limits may apply. Further, COVID-19 Payment Deferral for borrowers with an Enterprise-backed mortgage can now cover up to 15 months of missed payments. COVID-19 Payment Deferral allows those borrowers to repay their missed payments at the time the home is sold, refinanced, or at mortgage maturity.
“To keep families in their home during the pandemic, FHFA is allowing borrowers to be in COVID-19 forbearance for up to 15 months and extending the Enterprises' foreclosure and eviction extension," said Director Mark Calabria.
Currently, FHFA projects expenses of $1.5 to $2 billion will be borne by the Enterprises due to the existing COVID-19 foreclosure moratorium and its extension. FHFA continues to monitor the effect of the COVID-19 servicing policies on borrowers, the Enterprises and their counterparties, and the mortgage market. FHFA may extend or sunset its policies based on the data and the health risk.
The Federal Housing Finance Agency regulates Fannie Mae, Freddie Mac and the 11 Federal Home Loan Banks. These government-sponsored enterprises provide more than $6.7 trillion in funding for the U.S. mortgage markets and financial institutions. Additional information is available at www.FHFA.gov, on Twitter, @FHFA, YouTube, Facebook, and LinkedIn.
Order Amending Local Bankruptcy Rules
The Bankruptcy Court for the Northern District of Indiana (“IN-N”) has adopted a new local rule and corresponding form for filing a Response to Notice of Final Cure (“Response”) effective January 1, 2021. Changes are summarized below:
Title insurance is a very important part of the REO transaction. Originally resulting because of the CARES Act passed last March, several national title insurance companies issued bulletins to their agents regarding their various positions on what is needed for them to insure properties related to foreclosures. This led to the title insurance companies placing additional requirements and restrictions in order for them to insure properties at REO following a foreclosure that was conducted while the Act was in place. Although the Act itself has expired, the moratoriums are still in place and have been recently extended (again). The national title insurance companies have expanded their bulletins to include the same or similar requirements for foreclosures occurring during the moratoriums going into this year. At least one national title insurance company has taken a very conservative approach and will not insure any property related to a foreclosure action during the moratoriums, whether the property is vacant or abandoned. These restrictions will apply to loans involving HUD, VA, Fannie Mae, Freddie Mac, or USDA.
Arkansas Court of Appeals Holds Statute of Limitation Bars Foreclosure Five (5) Years After Acceleration Unless There Is Clear Intent to Abandon the Acceleration
On September 9. 2020, in the case of Ocwen Loan Servicing, LLC v. Oden, 2020 Ark. App. 384, The Arkansas Court of Appeals clarified what is needed to abandon a prior acceleration of a loan for purposes of the statute of limitations. The Court held that the servicer must show a clear intent to abandon a prior acceleration to prevent the expiration of the limitation period.
In Oden, the borrower’s last payment was made in November 2010, and the servicer declared a default on December 2, 2010. The servicer then sent a Notice of Acceleration on March 17, 2011, after which two different non-judicial foreclosures were started then canceled. In 2015 and 2016, eight (8) separate “Delinquency Notices” were sent to the borrows that stated the number of days since the date the loan had become delinquent and the total amount necessary to bring the loan current. In 2017, the borrowers filed a declaratory judgment action claiming that foreclosure was barred by Arkansas’ five (5) year statute of limitations.
On January 14, 2021, the United States Supreme Court handed down their decision in City of Chicago v. Fulton, No. 19-357, 2021 WL 125106 (Jan. 14, 2021). The question before the Court was whether an entity violates §362(a)(3) by retaining possession of a debtor’s property after a bankruptcy petition is filed. The Court held that mere retention of estate property after the filing of a bankruptcy petition does not violate §362(a)(3) of the Bankruptcy Code.
Until this decision, the majority position held by the Second, Seventh, Eighth, Ninth, and Eleventh Circuits was that the automatic stay prohibited a creditor’s passive retention of property seized before a bankruptcy case began. Weber v. SEFCU (In re Weber), 719 F.3d 72, 81 (2d Cir. 2013); Thompson v. General Motors Acceptance Corp., 566 F.3d 699 (7th Cir. 2009), Knaus v. Concordia Lumber Co. (In re Knaus), 889 F.2d 773, 775 (8th Cir. 1989); California Emp’t Dev. Dep’t v. Taxel (In re Del Mission Ltd.), 98 F.3d 1147, 1151 (9th Cir. 1996); Motors Acceptance Corp. v. Rozier (In re Rozier), 376 F.3d 1323, 1324 (11th Cir. 2004).
Florida Supreme Court Holds Borrower is Entitled to Attorney’s Fees Despite Bank’s Failure to Prove Standing at the Inception of the Case
On December 31, 2020, in Page v. Deutsche Bank Trust Company Americas, No. SC19-1137, the Florida Supreme Court quashed the Fourth DCA’s ruling that the borrower was not entitled to attorney’s fees due to the bank's failure to prove standing, and approved the decisions made in Madl v. Wells Fargo Bank, N.A., 244 So. 3d 1134 (Fla. 5th DCA 2017) and Harris v. Bank of New York Mellon, 2018 WL 6816177 (Fla. 2d DCA 2018).
In Page, the lower court held that the bank did not prove standing at the time the complaint was filed, but did establish standing at trial. The Fourth DCA ruled that the borrower who successfully argues that the bank lacked standing at the time the suit was filed cannot rely on the contract to obtain attorney’s fees under Fla. Stat. section 57.105(7).
The Fourth DCA in Page certified conflict with the Fifth DCA’s decision in Madl and the Second DCA’s decision in Harris. Both Madl and Harris held that a prevailing borrower is entitled to attorney’s fees if it is established that plaintiff became subject to the unilateral fee provision in the contract. In other words, if plaintiff lacks standing at the time the suit was filed, but subsequently establishes standing at trial, then the borrower is entitled to attorney’s fees under section 57.105(7). By contrast, in Page, the Fourth DCA did not give weight to the fact that the plaintiff subsequently established standing at trial.
PLG BLOG DISCLAIMER
The information contained on this blog shall not constitute legal advice or a legal opinion. The existence of or review and/or use of this blog or any information hereon does not and is not intended to create an attorney-client relationship. Further, no information on this blog should be construed as investment advice. Independent legal and financial advice should be sought before using any information obtained from this blog. It is important to note that the cases are subject to change with future court decisions or other changes in the law. For the most up-to-date information, please contact Padgett Law Group (“PLG”). PLG shall have no liability whatsoever to any user of this blog or any information contained hereon, for any claim(s) related in any way to the use of this blog. Users hereby release and hold harmless PLG of and from any and all liability for any claim(s), whether based in contract or in tort, including, but not limited to, claims for lost profits or consequential, exemplary, incidental, indirect, special, or punitive damages arising from or related to their use of the information contained on this blog or their inability to use this blog. This Blog is provided on an "as is" basis without warranties of any kind, either express or implied, including, but not limited to, warranties of title or implied warranties of merchantability or fitness for a particular purpose.